Investing in gold: Individual asset risk in the long run

•Gold returns are decomposed by time scale using wavelets.•Asset contributions to portfolio risk are evaluated over different time scales.•Gold provides the lowest contribution to portfolio risk in the long-term.•In the short-term, gold's contribution to portfolio risk is similar to stocks.

This study examines gold's contribution to portfolio risk over different time scales. The analysis is based on wavelet decompositions of the variances and covariances associated with a portfolio that includes gold, stocks, 10-year government bonds and three-month Treasury bills. The results suggest that gold provides the lowest contribution to portfolio risk only when considered over medium- and long-term investment horizons.